11 Ways to Survive a DOL Audit of Bona Fide Fringe Benefits

Make Sure Your Fringe Benefits and All Other Benefits Comply With the Law

Different regulations govern how you must provide bona fide fringe benefits to your prevailing wage workers and hourly workers. Compliance with the Employee Retirement Income Security Act (ERISA) and the Affordable Care Act (ACA) is an obligation you must fulfill in order to pass a Department of Labor (DOL) audit. Otherwise, you would be facing penalties for noncompliance as an employer.

However, there are tried and tested ways to ensure you will have an easy time surviving a DOL audit of bona fide fringe benefits. Read on to know more about 11 key pointers you should keep in mind.

Information that the DOL would ask for must always be kept updated and at hand. The full applicable plan document should always be accessible to employees who request it, and the SPDs should be distributed annually as well. The SPDs for your primary medical plan as well as all ERISA-covered health and welfare plans should also be updated every five years.

Keep a record of when you distribute the information to your employees and to what lists of prevailing wage or hourly workers.

2. Review the Summary of Benefits and Coverage (SBC) regularly.

Starting plan year 2018, there will be a new template for the SBC. You need to review your current SBC and you must always provide SBCs as part of open enrollment for the following plan year.

3. Determine Applicable Large Employer (ALE) status.

ACA has a provision for a “play or pay” or shared-responsibility mandate to provide coverage to full-time employees. As an employer, you need to know your employer status as well as the eligibility of your prevailing wage workers. Employers with 50 or more full-time employees or equivalent in part-time are subject to this mandate. A full-time employee, on the other hand, is defined as an individual who works at least 30 hours per week.

You need to show proof of your determination through calculation of hours worked per month by your employees.

4. Review existing health plans for different regulatory parameters.

Different parameters govern the types of fringe benefits plans that can be provided. The affordability percentage is the limit on the percent of an employee’s income that can be contributed to employer-sponsored coverage, and it is annually adjusted for inflation. You also need to keep track of minimum essential coverage and minimum value plan parameters.

5. Determine the potential for employer-mandate penalties.

There are employer-mandate penalties you need to keep in mind while preparing for open enrollment. These penalties are given under the Internal Revenue Code Sections 4980H(a) and/or (b). As mentioned, there are also ACA shared-responsibility provisions, and noncompliance can lead to penalties as well.

Use the measurement period to record the actual hours worked by a variable-hour employee. The administrative period is to calculate the average hours worked following the measurement period. Lastly, the stability period is the time when workers become eligible for benefits. Knowing and establishing these periods for new and variable-hour employees before open enrollment is an important yet often overlooked step.

7. Document all required health and welfare plan notices.

As an employer, you need to have an established model or procedure to distribute relevant information, including pre-ACA and ACA-required notices, and state-required notices. You should also document every time you release notices about the bona fide fringe benefits, open enrollment packages, and other related topics.

8. Fulfill Form 5500 filing requirements.

Form 5500 is an annual joint filing that must be submitted to the IRS and DOL concerning all ERISA plans. You can also use a combined form for all health and welfare plans for your hourly and prevailing wage workers (a “wraparound” document) to reduce compliance burden.

9. Know if you need annual PCORI filing.

The Patient-Centered Outcomes Research Institute (PCORI) is funded by an annual fee paid by group health insurance providers or by employers that sponsor self-insured plans. This annual fee is due by July 1, and is assessed for each plan year before Oct 1 2019. It is paid using IRS Form 720.

A benefit plan should not discriminate in favor of highly compensated or key employees when it comes to eligibility, fringe benefits or contributions, in order for the plan to qualify for tax-favored status. Take the step to audit your own plans to ensure nondiscrimination.

ACA information reporting is a daunting task, but it must be done in order to ensure compliance. If you cannot get information such as the Social Security numbers of enrolled children and dependents despite your best efforts, ensure that you document such efforts.

ARCHER JORDAN Will Help You Survive a DOL Audit

With more than 30 years of experience in the industry, ARCHER JORDAN can help you provide to your prevailing wage workers and hourly workers bona fide fringe benefits that comply with ERISA, ACA, and other state regulations. Right from day one, our team of professionals can guide you through the process of preparing the necessary documentation and reports for a DOL Audit. Contact ARCHER JORDAN today!